Although they are very different industries, electric cars and biofuels face a similar problem: their products receive a significant boost from government policy, but they still have to entice consumers to purchase government-endorsed products that are more expensive and, at the same time, don’t perform as well as incumbent products.
The government’s broad-brush approach to the problem has been ineffective. Hefty tax credits for those who buy electric cars (and who ends up paying for those credits, anyway?) and fuel mandates for biofuel producers have yet to persuade consumers to make the switch.
This sentiment is backed up in recent sales figures: Worldwide sales of the Nissan Leaf since 2010 reached 170,000 last month. In comparison, Honda sold 388,374 Accords in the US in 2014 alone. Ford President and CEO Mark Fields also stated recently that the adoption rates for electric vehicles are lower than anticipated, with consumers sticking to their conventional gasoline vehicles instead.
So, how can these industries bring in new customers? The solution is simple: make your products cheaper even if it means taking a loss. Selling electric vehicles at a lower price, or making fuels like E85 widely available and cheaper than petroleum fuels will give consumers the immediate incentive to buy the products. If E85 was cheaper, for example, perhaps motorists would ignore the poor mileage and higher cost-per-mile expenses.
Of course, some may think it sounds absurd to ask these industries to absorb losses in order to sell more product. But it is no less absurd than having taxpayers reach into their wallet every time somebody wants to buy an electric car. Nor is it any less absurd than biofuel producers expecting the oil industry to build its infrastructure for them.
However, absurdity has not been an obstacle for the government in the past. But we can always hope it will become one in the future.